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NEW DELHI: When finance minister P Chidambaram said in October last year that he would limit fiscal deficit to 5.3% of GDP, only his ardent supporters gave him some chance of meeting the stiff target.

The young crop of economists had laughed it off with targets of 5.8% and some even 6%.

Barely three months later, Chidambaram has converted many doubting Thomases with credible action on fuel prices, relentless chipping away at expenditure and desperate search for revenues, an effort that showed up in December-end numbers.

In the last few days, several brokerages have cautiously put out reports that say the 5.3% target is achievable, albeit with some caveats, while international rating agencies, which had threatened downgrades, have softened their tone.

"In contrast to trends a few months ago, we now think this (5.3% of GDP) could be achieved," wrote Citi economist Rohini Malkani in a note on Monday, adding that the success of disinvestment programme and spectrum auction will be crucial.

HDFC Bank expects slippage on tax collections and spectrum proceeds and higher subsidy burden than 1.9 lakh crore provided in the budget, but feels reduction in expenditure and higher dividends from state-run companies will help keep deficit at 5.3% of GDP.

"The target is well within reach," a senior finance ministry official told ET.

The budget presented by the then finance minister Pranab Mukherjee in March last year had been panned by experts for optimistic revenue assumptions and under-provided subsidies.

Against a budgeted fiscal deficit of 5.1% of GDP, most private estimates had pegged the deficit at near 6% of GDP. That fiscal deficit for the year 2011-12 was 1.8% points higher than budgeted 4.1% of the GDP, did further damage to the credibility of government's estimates.

After taking over as finance minister in August last year, Chidambaram had set up a committee under Vijay Kelkar to suggest a fiscal consolidation plan, and based on that announced a revised fiscal deficit target of 5.3% of GDP for the current fiscal year and a roadmap to bring it down to 3% of GDP in 2016-17.

He backed that promise with increase in price of diesel, a cap on the number of subsidied cooking gas cylinders and a massive cut in plan expenditure. "This (5.3% fiscal deficit) would have appeared unrealistic just a few months ago, but the recent fuel price decisions and expenditure data are encouraging," wrote Taimur Baig and Kaushik Das of Deutsche Bank, in a recent report.

"If the government slashes plan expenditure by 28% in FY13, as reported in the media, and postpones subsidy payments, then the revised fiscal deficit target (5.3% of GDP) will be in the realms of possibility with a chance of even under-shooting it," said Nomura's Sonal Varma and Aman Mohunta in a note last week.

The government has run up a fiscal deficit of 78.8% of budget estimates, against 80.4% in December, suggesting a marginal saving in December because of sharp expenditure cuts and massive attempts to shore up tax revenues. The finance ministry has issued warnings to taxpayers to come clean, holding out the threat of prosecution, and asked the tax administration to go all out to raise revenues, even as it has applied an expenditure squeeze on ministries, with some facing up to 30% cut in allocations.

Plan expenditure stood at 56.8% of the budget estimates in April-December period of 2012-13, compared with 62.7% in the previous fiscal and has risen only 6.9% as against budget rate of 22.1%.

Since ministries and departments cannot spend more than 33% of the allocation in the last quarter, there is likely to be substantial saving on plan spending.

HDFC Bank expects expenditure reduction of about 1 lakh crore in the current fiscal. Rating agencies that have put India's barely investment-grade rating on watch have also softened their view of late. "Public commitments and policy announcements by the Indian government so far in 2013 are encouraging signals that the authorities want to maintain the momentum towards fiscal consolidation and structural reform generated since last summer," Fitch Ratings said on Monday.

However, the massive squeeze has raised concerns over the quality of fiscal consolidation. "Compromising on growth-critical spending is not helpful for the economy, especially when private investment is anemic," say Taimur Baig and Kaushik Das.